Observations on urban motherhood, current events and anything else that sparks my imagination.

Monday, May 24, 2010

Foolish investment choices

Amidst an avalanche of other depressing news this morning, Peter Goodman writes in the NYT Business Section about a phenomenon threatening to undermine a cornerstone of Bill Clinton's 1996 welfare reform: the program that subsidized care of small children so their parents could get off the welfare rolls and rejoin the workforce. In response to the economic crisis, several states have slashed child care programs in a misguided attempt to meet budget shortfalls. More than a dozen states now have long waiting lists for subsidized day care spots, which means the parents cannot go to work and must fall back on traditional welfare to survive. Crazy, right?

All social programs cost money, which seems to be in scarce supply these days. But a quick look at where the federal government spends each tax dollar shows that our priorities are grossly out of whack. It's a commonly held misconception that defense takes the biggest chunk of tax revenues. Not so. Twenty cents of each dollar goes to security and national defense, including the two wars. Meanwhile, an equal percentage of every dollar goes to entitlements for citizens age 65 and older, in the form of Social Security, regardless of need. Another 14 cents of every dollar goes to the same segment of the population, again regardless of need. Need-blind entitlements for the retirement age population only account for at least 34 cents per tax dollar collected by the federal government. Subsidized child care accounts for less than a penny.

Such programs count as a small portion of the 14 cents per tax dollar that funds what's known in shorthand as the Safety Net. It includes, among other things, monetary assistance to the disabled and the very poor; school lunch programs; programs for abused children; unemployment insurance; low income housing assistance; food stamps; earned income and child tax credits; and child care assistance that allows parents to get off the other types of assistance by going to work.

14 cents from each tax dollar covers all of that. According to the Center on Budget and Policy Priorities, the Safety Net kept 15 million citizens out of poverty and reduced the depth of poverty for another 29 million. Keep in mind that one in five American children lives at or below the poverty line, according to the U.S. Census Bureau.

Which, as Goodman writes, means that when subsidized childcare falls by the wayside while states scramble to balance budgets, more poor and marginally poor children will be pushed further down the economic ladder because their parents will have no choice but to give up work and collect traditional welfare checks. Hardly a desirable result, particularly for those who enjoy railing against entitlements.

What about this moderate proposal? Let's eliminate federal payments to senior citizens whose net worth, excluding primary residence, exceeds a million dollars. Sure, that change would only represent a drop in the bucket compared to the billions paid out in Medicare and Social Security to the rest of the senior population. I don't know if that would make up the amount needed, and it certainly wouldn't cover any broad expansion of this useful program.

Still, I think it's an interesting idea. Why can't we as a society eliminate an entitlement to rich old people to offset the price of a benefit to impoverished infants and children?

Recently axed subsidized child care programs that were keeping women like Alexandria Wallace, the first subject in Goodman's article, at work and off welfare, were only costing the taxpayers a less than one per cent of every dollar collected. Because affordable day care is no longer available, Ms. Wallace cannot keep her job. In its effort to economize, the government adds her and her child to the welfare rolls.

We should make a modest step towards sensibly reducing our enormous investment in the past generation while increasing our investment in the future one. Let's not let short sighted financial planning, misguided anger about entitlements and plain narrow mindedness derail one of the great policy successes of the previous decade.

I write often about choices, but I think it's important to devote some consideration to families who don't have the luxury of options.

I'd be happy to give another penny to subsidize day care for needy children so their parents can have a fair chance at clawing their way out of poverty.